FY18 Half Year Results Presentation FY18 Half Year Results Presentation 7 Greenfield Developments...
Transcript of FY18 Half Year Results Presentation FY18 Half Year Results Presentation 7 Greenfield Developments...
FY18 Half Year Results
Presentation Andrew Sudholz
Managing Director & CEO
Chris Price
Chief Financial Officer
FY18 Half Year Results Presentation
Section One Business Performance 3
Section Two Japara Strategy 14
Section Three Outlook 22
Section Four Appendices 24
2
Contents
Section One: Business Performance
FY18 Half Year Results Presentation 3
Total Revenue $182.5m
Up 2.2%
Government funding cuts
offset by capacity
expansion
Growth from brownfield
developments completed
in FY17
NPAT $10.3m
Down 29.5% due to lower EBITDA
Lower tax offset
higher depreciation
Interim dividend
4.0 cents per share
(franked to 65%)
EBITDA $24.3m Down 16.5% and in line with previous guidance
No ACFI indexation in FY18
and ACFI scoring changes
offset rising acuity
Abnormally severe influenza
outbreaks caused temporary
fall in occupancy (currently
back to 93.5%)
Wages growth of circa 5%
from final year of former
Victorian EBA (circa 2.5%
going forward)
FY18 Half Year Results Presentation
Revenue and profit negatively impacted by government funding cuts and temporary fall in occupancy
4
H1 FY18 – Financial overview
Superior Capital Structure
Net bank debt $24.4m
Funding in place for growth
Strong Balance Sheet
Supported by circa $560m
of property assets at cost
FY18 Half Year Results Presentation
Strong cash flows and capital structure support future growth
Net RAD Inflows $25.9m
Supporting strong cash flows
& exceeding expectations
5
H1 FY18 – Financial overview
FY18 Half Year Results Presentation 6
H1 FY18 – Operational overview
Excellence in care maintained
Care
100% accreditation
record maintained in
increasingly regulated
environment
High quality care
remains fundamental
to our model
Bed Prices
Consistent with previous
half at circa $351k
Expected to increase
with developments
program
Operational Beds
Bed numbers grow to
3,906 as developments
complete
Delivering on growth
strategy
Occupancy
Average underlying
occupancy of 92.3%
for H1 FY18 but now
normalising
Recovering as
expected and now at
93.5%
FY18 Half Year Results Presentation 7
Greenfield
Developments
Riverside Views (Tas)
opened in October 2017 and
ramping up as expected
10 greenfield projects
underway providing 1,055
new places and 965 net new
places
Cornerstone of organic
growth strategy
Capital
Expenditure
$51m spent primarily on
land and developments
in H1 FY18
Strong cash flows
underpin development
program
Brownfield
Developments
Noosa (Qld) completed in
August 2017 • Now 177 bed fully
refurbished home
5 developments
underway providing 182
new places, 156 net new
places and refurbished
homes
Excellent returns from
extending current
homes
Significant
Refurbishment
Program
Upgrading 14 homes by
H2 FY19: • 2 completed
• 2 under construction
• 4 in tender
Reinvigorating existing
homes
H1 FY18 – Development progress Excellent progress in line with strategy
FY18 Half Year Results Presentation
$ Millions H1 FY18 H1 FY17 Change %
EBITDA from recurring operations 24.9 28.6 (12.9)
EBITDA from property-related gains 1.7 1.3 30.8
Redundancy costs (1.6) (0.8) (100.0)
Riverside Views start-up costs (0.7) n/a n/a
EBITDA 24.3 29.1 (16.5)
Total revenue (limited by occupancy pressure & current year ACFI freeze) 182.5 178.5 2.2
Total costs 158.2 149.4 5.9
EBITDA 24.3 29.1 (16.5)
Depreciation (increased by new developments coming online) 7.8 6.7 16.4
EBIT 16.5 22.3 (26.0)
NPAT 10.3 14.6 (29.5)
EPS 3.9 cps 5.5 cps (29.1)
Interim dividend 4.0 cps 5.5 cps (27.3)
8
H1 FY18 – Profit & loss summary EBITDA in line with updated guidance
FY18 Half Year Results Presentation 9
H1 FY17 – H1 FY18 Significant movements
EBITDA
29.1
24.3
2.1(1.1)
(3.2)
(1.5)
(1.1)
20.0
25.0
30.0
35.0
40.0
45.0
H1 FY17 EBITDA Completed Brownfields:- Central Park
- Kirralee- George Vowell
- St Judes
Net change in:- Property gains- Redundancies
- Riverside Views start-up
Wage increases(ex brownfields and
Riverside Views)
Lower occupancy Other H1 FY18 EBITDA
EBIT
DA
$ M
illio
ns
Increases totalling circa 5% from final year of former Victorian EBA impacting H1 FY18. Go forward rate of circa 2.5%
Government funding cuts and ACFI indexation freeze in FY18
$3m below managementexpectations
FY18 Half Year Results Presentation 10
H1 FY18 H2 FY17 H1 FY17
Number of homes 44 43 43
Operational places 3,906 3,841 3,840
Average underlying occupancy1 92.3% 94.7% 94.4%
Average revenue per occupied bed day ($)2 276.9 275.3 276.1
Average Government revenue per occupied bed day ($) 197.7 196.6 198.4
Staff costs to revenue2 70.2% 70.2% 68.4%
Non-wage costs to revenue2 16.5% 15.3% 15.9%
Average concessional residents3 38.2% 39.0% 37.9%
Average incoming bed contract price ($’000) 350.6 351.7 339.7
Net RAD/Bond & ILU loan inflow ($’m) 25.9 26.7 29.0
Notes:
1. Average underlying occupancy excluded homes undergoing development in the FY17 year. Homes
undergoing development in H1 FY18 have not materially impacted occupancy and have been included for
the purposes of calculating occupancy
2. Metrics shown exclude property related gains and redundancy costs
3. Calculated as the number of concessional residents: operational places
Completed developments coming online
Operational places movement 30 June 2017 3,841 - Riverside Views 28 - Central Park 25 - Kirralee 12 31 December 2017 3,906
Key operational metrics
FY18 Half Year Results Presentation 11
• As previously highlighted, occupancy during the first half of FY18 has been impacted by
unusually severe influenza outbreaks, both in terms of duration and number of residents
affected
• Occupancy has started to recover in the second half of FY18 and is anticipated to return to
historic average levels of around 94% to 95% over the balance of FY18
Occupancy
The fall in occupancy as a result of the influenza outbreaks is recovering
92.0%
92.5%
93.0%
93.5%
94.0%
94.5%
95.0%
H1 FY15 H2 FY15 H1 FY16 H2 FY16 H1 FY17 H2 FY17 H1 FY18 June 18(estimated)
Underlying occupancy %
Occupancy currently 93.5%
Occupancy forecast of 94% - 95% by 30 Jun 2018
FY18 Half Year Results Presentation 12
Balance sheet as at
31 December 2017 $m
Property, plant and
equipment 624.3
Intangibles 463.5
Other assets 27.9
RAD liabilities (457.9)
Other liabilities (102.3)
Net bank debt (24.4)
Net assets 531.1
• Low net bank debt
• Available liquidity circa $196m
(undrawn credit lines plus cash)
Balance sheet and cash generation
Balance sheet strength and funding flexibility maintained
Investing in expanding and enhancing operations
-50.0
-30.0
-10.0
10.0
30.0
50.0
70.0
Net Bank Debt at30/6/17
Cash from OperatingActivities
Net RAD Inflows January AdvanceFunding
Land purchases Greenfield &Brownfield
DevelopmentCapital Works
Maintenance Capex IT Capex Dividend / DRP Net Bank Debt at31/12/17
Cash Generation in H1 FY18 ($m)
(24.4)
(19.6) 14.4
(28.3)
(3.1)(4.9)
25.9
20.7
(14.9)
(14.6)
FY18 Half Year Results Presentation 13
Room prices & RAD:DAP mix trends Slight trend up in RAD proportion in H1 FY18
Average Incoming Bed Contract Price ($’000)
• The RAD:DAP:Combination profile
provides an appropriate balance between
capital and income
• Average bed price constant in H1 primarily
due to mix of rooms turned over
• Increase in average bed price expected as
development program progresses in
optimal metropolitan locations
Incoming Non-Concessional Residents Total Portfolio H1 FY18
(PCP in brackets)
56.5%26.2%
17.3%
RAD DAP Combo
(18.2%)
(24.2%)(57.6%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
RAD DAP Combo
$260
$270
$280
$290
$300
$310
$320
$330
$340
$350
$360
H1 FY15 H2 FY15 H1 FY16 H2 FY16 H1 FY17 H2 FY17 H1 FY18
Section Two: Japara Strategy
FY18 Half Year Results Presentation 14
Executing strategy
Roster optimisation
• A review of rosters is underway to ensure the highest standard of
care in the current environment
• Workforce management tool implemented in H2 FY17 is supporting
improved efficiencies
• Roster reviews were completed at 14 homes in H1 FY18 and 15 are
scheduled for H2 FY18
Information technology
• Workforce management system – Vic, NSW and Tas complete
• Wi-Fi to every room – underway; complete by August 2018
• Finance / Resident / Customer Management system – underway;
implemented by July 2018
• Clinical and Medication management system – FY19
Specialised dementia services
• Trialling new technologies
• Enhanced design in new development projects
• Specialist skills employed
FY18 Half Year Results Presentation 15
Operations & innovation
16 FY18 Half Year Results Presentation
Comprises over 1,120 net new places, expected to be delivered by the end of FY20
• Japara’s significant pipeline comprises brownfield
developments, greenfield developments and significant
refurbishment of selected homes:
• Brownfield developments: 5 homes (156 net
new places)
• Greenfield developments: 10 homes (965 net
new places)
• Significant refurbishment: 14 homes (all
brownfield developments will meet significant
refurbishment requirements)
• Development pipeline largely metro weighted
• EBITDA per place in line with our best performing homes
is expected across the development pipeline post ramp
up period
• Ramp up profiles dependent on the size of the
development and range between 6 – 12 months
• Development pipeline to be primarily debt funded with
subsequent RAD cash flow used to pay down debt
Executing strategy Development pipeline
3,8
41
3,9
66
4,2
14
5,0
87
88 37 60 99 56 16 17 77
29 106
106 92 38 110
135 60 120
3,000
3,500
4,000
4,500
5,000
5,500
FY
17
Actu
al
Riv
ersid
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iew
s (
GF
)
Oth
er
FY
18
Gle
n W
ave
rle
y (
GF
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Ry
e (
GF
)
Kin
gsto
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ard
en
s (
BF
)
Mir
rid
on
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BF
)
Str
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i H
ou
se
(B
F)
FY
19
Mo
un
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ave
rle
y (
GF
)
Alb
ury
(B
F)
Ro
bin
a (
GF
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Mit
ch
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(G
F)
Ly
ste
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ld (
GF
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Bri
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(B
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Be
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se
(G
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Hig
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GF
)
Ne
wp
ort
(G
F)
Re
se
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ir (
GF
)
FY
20
Development pipeline (operational places)
FY18 Half Year Results Presentation 17
• Admissions commenced October 2017 and currently
has 40 residents
• Ramp-up on target with 94% occupancy expected by
June 2018
• Break-even expected in Q3 FY18
Executing strategy Riverside Views update
0
5
10
15
20
25
30
35
40
45
Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18
Beds occupied by month
88 bed greenfield development in Launceston, Tasmania
FY18 Half Year Results Presentation 18 18 FY18 Half Year Results Presentation
2 projects successfully delivered during H1 FY18; 5 Brownfields in progress
Home Program status
Total new
places Net new places
Single bed
profile
Estimated resident
admission
Kingston Gardens (Springvale) Construction 68 56 100% FY19 H1
Mirridong (Bendigo) Pre-construction 16 16 100% FY19 H1
Strzelecki House (Mirboo North) Tender 17 17 92% FY19 H2
Albury (NSW) Town Planning 29 29 100% FY20 H1
Brighton (SA) Concept Design 52 38 93% FY20 H1
182 156
Home Program status
Total new
places Net new places
Single bed
profile Resident
admission
Noosa (Qld) - Brownfield Completed 12 0 93% FY18 H1
Riverside Views (Tas) - Greenfield Completed 88 88 100% FY18 H1
100 88
Brownfield update
Completed developments
Executing strategy Completed developments & brownfield update
FY18 Half Year Results Presentation 19
Optimal locations Program status
Total new
places Net new places
Single bed
profile
Estimated resident
admission
Glen Waverley (Melbourne) Construction 60 60 90% FY19 H12
Rye (Melbourne) Construction 99 99 100% FY19 H12
Mount Waverley (Melbourne) Detailed Design 107 77 100% FY20 H1
Robina (Gold Coast) Tender 106 106 100% FY20 H1
Mitchelton (Brisbane) Town Planning 106 106 100% FY20 H1
Lysterfield (Melbourne) Town Planning 92 92 100% FY20 H1
Belrose (Sydney) Town Planning1 110 110 94% FY20 H2
Highton (Geelong) Town Planning 135 135 100% FY20 H2
Newport (Melbourne) Detailed Design 120 60 100% FY20 H2
Reservoir (Melbourne) Concept Design 120 120 100% FY20 H2
1,055 965
• Over 1,000 bed licenses owned or secured to support developments program
• 8 land parcels settled
• 2 land parcels with deposit paid
In optimal metropolitan locations
Note 1: Additional planning approval risk associated with this project Note 2: Construction completion expected June 2018
Executing strategy Greenfields program
FY18 Half Year Results Presentation 20
• Enhances resident experience
• Improves room values and accommodation supplements
• Maintains asset lifecycle and quality of accommodation
Home Expected Completion
South West Rocks (NSW) Complete
The Homestead (SA) Complete
Bonbeach (VIC) FY18 H2
Sandhurst (VIC) FY18 H2
Goonawarra (VIC) FY19 H1
Roccoco (VIC) FY19 H1
Coffs Harbour (NSW) FY19 H1
Gympie (QLD) FY19 H1
Scottvale (VIC) FY19 H1
Springvale (VIC) FY19 H1
Viewhills Manor (VIC) FY19 H1
Lakes Entrance (VIC) FY19 H2
Narracan Gardens (VIC) FY19 H2
Hallam (VIC) FY19 H2
Executing strategy Significant refurbishment program
FY18 Half Year Results Presentation 21
Existing projects:
• 180 Independent Living Units and Apartments (ILUs & ILAs)
across 5 locations adjoining residential aged care homes
• Have owned and operated these for 5+ years
• Provide attractive growth opportunity in particular
circumstances
Proposed developments:
• Further 200+ ILUs & ILAs across 3 locations adjoining
existing residential aged care homes in our portfolio
• Launceston
• Springvale
• Reservoir
Community living in continuum of care
Proposed Launceston development
Executing strategy
Co-located homes providing continuum of care – the future environment
FY18 Half Year Results Presentation 22
Section Three: Outlook
FY18 Half Year Results Presentation 23
FY18
• Second half EBITDA expected
to exceed the first half due
primarily to:
• recovering occupancy
levels;
• increasing contribution from
completed greenfield and
brownfield developments;
• increasing cost efficiencies
achieved through the work
force management system
and roster optimisation
programs;
• partially offset by 3
additional public holidays
FY19
• EBITDA is expected to
increase further in FY19 as the
aforementioned initiatives gain
further traction, occupancy
normalises and ACFI
indexation recommences
• Japara’s strategy provides an
excellent foundation for
medium term growth and is
supported by a strong balance
sheet and cash flows
Outlook - in line with December 2017
guidance
FY18 Half Year Results Presentation 24
Section Four: Appendices
25 Half Year Results Presentation
44 residential aged care
homes
Over 3,900
operational places
100% accreditation
record
Growing portfolio across
5 States
180 Independent living units / apartments
Over
5,250 employees
Appendix 1: Japara’s residential aged care portfolio
One of Australia’s largest residential aged care providers,
with a growing national footprint
FY18 Half Year Results Presentation 26
Appendix 2: Japara’s integrated value creation strategy
FY18 Half Year Results Presentation 27
Appendix 3: Portfolio metrics
As at As at
Change 31-Dec-17 31-Dec-16
Resident mix
Concessional 1,442 40% 1,434 40% 0.6%
RAD 1,141 32% 1,144 32% (0.2%)
DAP 530 15% 481 14% 10.1%
Combination 349 10% 361 10% (3.3%)
Pre-reform high-care places 34 1% 50 1% (32.0%)
Respite 69 2% 61 2% 13.1%
TCP / Other 32 1% 30 1% 6.7%
Total residents 3,597 100% 3,561 100% 1.0%
Staffing
Number of staff (including part time and casuals) 5,254 5,275 (0.4%)
Places
Operational places 3,906 3,840 1.7%
Non-operational places 115 200 (42.5%)
Provisional ACAR allocations 929 721 28.8%
Total places 4,950 4,761 4.0%
Places (metro/regional split)
Metro 3,008 61% 2,755 58% 9.2%
Regional 1,942 39% 2,006 42% (3.2%)
Total places 4,950 100% 4,761 100% 4.0%
Funded bed days 653,024 641,849 1.7%
Geographic spread (homes)
VIC 70% 72%
SA 11% 12%
NSW 9% 9%
QLD 5% 5%
TAS 5% 2%
100% 100%
FY18 Half Year Results Presentation 28
Appendix 4: Detailed profit and loss
H1 FY18 H1 FY17 Change
$'000 $'000 % $'000
Revenue
Government care funding 129,122 127,364 1.4% 1,758
Resident care funding 51,473 49,729 3.5% 1,744
Other revenue 1,912 1,408 35.8% 504
Total revenue 182,507 178,501 2.2% 4,006
Expenses
Staff costs (128,457) (121,262) 5.9% (7,195)
Resident costs (15,123) (14,069) 7.5% (1,054)
Other costs (14,663) (14,115) 3.9% (548)
Total expenses (158,243) (149,446) 5.9% (8,797)
EBITDA 24,264 29,055 (16.5%) (4,791)
Depreciation and amortisation (7,761) (6,720) 15.5% (1,041)
EBIT 16,503 22,335 (26.1%) (5,832)
Net interest expense (1,745) (1,589) 9.8% (156)
Income tax expense (4,479) (6,113) (26.7%) 1,634
NPAT 10,279 14,633 (29.8%) (4,354)
FY18 Half Year Results Presentation 29
Appendix 5: Detailed statutory cash flow statement
H1 FY18 H1 FY17
$'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers 200,294 194,175
Payments to suppliers and employees (158,706) (150,365)
Income taxes paid (4,900) (5,720)
Interest received 361 309
Finance costs paid (1,971) (1,006)
Net cash provided by operating activities 35,078 37,393
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land & buildings (14,828) (5,053)
Proceeds from sale of land & buildings 207 82
Purchase of plant and equipment (4,659) (3,878)
Capital works in progress (31,536) (17,957)
Net cash used in investing activities (50,816) (26,806)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of share capital under DRP 394 2,770
Dividends paid (15,268) (15,161)
Net proceeds from bank borrowings 25,000 11,500
Proceeds from RADs/accommodation bonds & ILU resident loans 101,690 90,329
Repayment of RADs/accommodation bonds & ILU resident loans (75,838) (61,366)
Net cash provided by financing activities 35,978 28,072
Net increase in cash and cash equivalents held 20,240 38,659
Cash and cash equivalents at beginning of the half year 41,376 24,568
Cash and cash equivalents at end of the year 61,616 63,227
FY18 Half Year Results Presentation 30
Appendix 6: Balance sheet 31-Dec-17 30-Jun-17
$'000 $'000
ASSETS
CURRENT ASSETS
Cash 61,616 41,376
Trade and other receivables 8,421 15,838
Current tax receivable 3,828 1,162
Other assets 8,614 6,081
TOTAL CURRENT ASSETS 82,479 64,457
NON-CURRENT ASSETS
Trade and other receivables 1,857 2,222
Inventories - 3,045
Non-current assets held for sale 1,313 1,477
Property, plant and equipment 585,881 541,776
Investment property 38,372 32,972
Deferred tax assets 3,914 6,161
Intangible assets and goodwill 463,458 463,458
TOTAL NON-CURRENT ASSETS 1,094,795 1,051,111
TOTAL ASSETS 1,177,274 1,115,568
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 38,803 18,876
Other liabilities 7,667 11,541
Loans and borrowings 12,000 4,600
Other financial liabilities 478,461 453,103
Short-term provisions 31,237 31,338
TOTAL CURRENT LIABILITIES 568,168 519,458
NON-CURRENT LIABILITIES
Loans and borrowings 74,000 56,400
Long-term provisions 3,990 3,996
TOTAL NON-CURRENT LIABILITIES 77,990 60,396
TOTAL LIABILITIES 646,158 579,854
NET ASSETS 531,116 535,714
EQUITY
Issued capital 522,719 522,328
Retained earnings 8,397 13,386
TOTAL EQUITY 531,116 535,714
FY18 Half Year Results Presentation 31
Disclaimer
This presentation was prepared by Japara Healthcare Limited (ABN 54 168 631 052), the Company. Information contained in this
presentation is current as at 26 February 2018. This presentation is provided for information purposes only and has been prepared
without taking account of any particular reader’s financial situation, objectives or needs. Nothing contained in this presentation constitutes
investment, legal, tax or other advice. Accordingly, readers should, before acting on any information in this presentation, consider its
appropriateness, having regard to their objectives, financial situation and needs, and seek the assistance of their financial or other
licensed professional adviser before making any investment decision. This presentation does not constitute an offer, invitation, solicitation
or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or
commitment.
Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness
of the information, opinions and conclusions, or as to the reasonableness of any assumption, contained in this presentation. By reading
this presentation and to the extent permitted by law, the reader releases the Company and its affiliates, and any of their respective
directors, officers, employees, representatives or advisers from any liability (including, without limitation, in respect of direct, indirect
or consequential loss or damage or loss or damage arising by negligence) arising in relation to any reader relying on anything contained
in or omitted from this presentation.
The forward looking statements included in this presentation involve subjective judgment and analysis and are subject to significant
uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, the Company. In particular, they
speak only as of the date of these materials, they assume the success of Japara Healthcare Limited’s business strategies, and they are
subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially
from forward looking statements and the assumptions on which those statements are based. Given these uncertainties, readers are
cautioned not to place reliance on such forward looking statements. Past performance is not a reliable indicator of future performance.